Deal was no scam, just too good to be true

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Retirees were persuaded the plan was a winner. It wasn't, write
Leonie Wood and Bridie Smith.

AT NUMBER 1 Queens Road, the glassy office block overlooking
Albert Park Lake, there is no level 13. It's a superstitious
gesture, to ward off bad luck. And luck, as some say, is a fortune
in the property game.

So office suites 1415 and 1215, with their sweeping views
towards Port Phillip Bay, are stacked one on top of the other.

Until a week ago the suite on level 14 housed Money for Living,
a property purchasing firm run by Stephen Mark O'Neill, his
girlfriend Jolanta Olszewski and his brother Gary O'Neill. They
bought and sold residential property.

Directly below are the offices of Diakou Faigen Lawyers, run by
Jim Diakou and Daniel Faigen. They acted for Money for Living's
financiers, MKM Capital, which also has offices on level 14.

A year ago Stephen O'Neill ambled into the Diakou Faigen
offices, handed his business card and some preliminary marketing
material to Mr Faigen and asked if the lawyers were interested in
taking on clients referred from Money for Living.

It seemed a reasonable idea. The Queens Road building was a hub
of networking: It was not unusual for clients to be relayed from
one suite to the next. Diakou Faigen did some routine background
checks of Stephen O'Neill's corporate record. It was not a detailed
search, but it did turn up a reference to a Stephen O'Neill who had
been convicted of fraud and theft in 2001 and jailed for three
years. One of the Diakou Faigen staff members asked Mr O'Neill if
it was him and, according to Mr Faigen, Mr O'Neill "categorically
denied it".

"He was asked, 'Is this you?', and he denied it," Mr Faigen
said.

Over the next few months Money for Living referred a stream of
clients to Diakou Faigen. All up, the lawyers may have handled up
to two-thirds of Money for Living's 120 clients.

These were all elderly retirees who believed they were getting
financial security for life. They sold their fully paid homes, most
valued around $300,000, to Money for Living in return for a lump
sum of about $40,000-$50,000 plus a monthly payment for life of
$500 to $1000 and guaranteed tenancy in their home. Money for
Living would pay all their home insurance, council rates, water and
home maintenance bills.

The clincher was the monthly cash: anything extra comes in handy
when you are on the pension.

The O'Neills marketed the scheme hard  advertisements on
easy listening radio stations favoured by the elderly and glossy
brochures that featured television and radio personality Paul
Cronin and the fearless sporting hero of an older generation, Dawn
Fraser.

The ads promised to "make life easier for retirees". Retirees
could live beyond their financial means, enjoy everything from
holidays, new cars and trips to the pokies, by releasing the value
of their greatest asset  their home.

Money for Living is now in the hands of administrators at
Ferrier Hodgson after it ran out of cash. Its principals are under
investigation by the Australian Securities and Investments
Commission and Victoria's Consumer Affairs office.

Some of the retirees will now rank as creditors along with
tradesmen and insurance companies, local councils and the Tax
Office, who are all battling to salvage what they can from a
company whose only assets appear to be wait for it
the retirees' homes.

To top it off, Stephen O'Neill is indeed the same convicted
fraudster who in 2001 pleaded guilty to using forged documents and
theft when he was a director of a mortgage loan business in the
late 1990s.

Over four years to 1999, Mr O'Neill drew cheques totalling more
than $2 million from the previous business' trust account and used
the funds for his own purposes. About $1 million was not
recovered.

These convictions automatically barred Mr O'Neill from managing
companies or serving as a director for five years. That ban is
still in place.

Mr Faigen is adamant that "to all intents and purposes" Stephen
O'Neill ran Money for Living. "He put himself out to be the manager
of the company," Mr Faigen said.

Diakou Faigen now accuses Mr O'Neill of engaging in false and
misleading representation. The lawyers have launched action in the
Federal Court to try to unravel some of the property deals.

ASIC's inquiries are widening. Not only is it concerned at
allegations that Stephen O'Neill appeared to be managing the
company, it is examining whether Money for Living should have held
a licence to sell a financial product, and the possibility that it
was operating as an unregistered managed investment scheme.

ASIC also is considering what action it can take over the
properties.

There was nothing illegal about Money for Living's scheme, but
it was a lousy deal. Money for Living was not offering a reverse
mortgage. The retirees were selling their homes  not
borrowing against them  and they were getting only a fraction
of the property's agreed value through instalments. They were
surrendering any potential capital gain, and instead of being the
owner of a fully paid asset their financial livelihood depended on
the viability of whoever ended up owning the title to the
property.

Money for Living got its income by reselling the properties to
third parties for a fee of about $30,000 for each property. It is
not clear if any of the new owners are associated with the
O'Neills, but some were unusually enthusiastic buyers, snapping up
more than a dozen titles each.

In all, about 80 of the 120 houses were sold to third parties,
who must pay the retirees their monthly stipend of $1000.

Money for Living sold 14 of the properties to its own company,
MFL Property Holdings.

And therein lay the risk: if Money for Living were to fall over
or the new titleholders could not meet their financial commitments,
the income stream for the retirees would evaporate.

About 120 home owners, from Hoppers Crossing to Hawthorn East,
Echuca to Traralgon, fell for the spiel. For many, their hopes of
financial security are fading.

The administrators have assured the group of 40 whose properties
had not yet been sold that they will not be evicted, but nor will
they get their monthly payments. Whether they will ever get their
properties back is another question, one that is likely to drag
through the courts.

In Melbourne's lower sand-belt bayside suburbs  areas
around Edithvale and Carrum, where 50-year-old brick veneer homes
are being renovated by a new generation  Des Connor, a
welfare officer at Bay Side Regional Veterans Centre, drives
elderly people from homes to hospitals and listens to their myriad
problems about money. He also heard plenty of Money for Living
radio ads.

"It was the vulnerable people they got," he said.

"A lot of these people have done it hard and gone through the
Depression, and they scrimp and save to buy their house only to go
through all this and have it taken off them by these mongrels."

Mr Connor begged officials to do something, but he says the only
one who took note was Jenny Lindell, the Labor member for Carrum,
who raised the matter in State Parliament in May. ASIC and Consumer
Affairs launched investigations.

In late June, a report appeared in a suburban newspaper
highlighting Stephen O'Neill's previous conviction for fraud and
theft and his connection with Money for Living. The lawyers at
Diakou Faigen were alarmed, and so were Money for Living staff.
They raised their concerns directly with Mr O'Neill.

"We would ask a question about the security of the company and
he would give us these magnificent answers," said a former
employee. "He'd say, 'It's all settled, everything's fine, don't
worry, it's all in hand. I'll have some great news for you on June
1'. Then it was June 30 "

Stephen O'Neill admitted to Mr Faigen and Mr Diakou that,
contrary to what he said a year ago, he did have a conviction. He
apologised and left the company in the hands of his girlfriend and
brother.

Diakou Faigen then urged its clients to put caveats on the
titles of their former homes, to declare that even if they did not
own the properties they still had an interest in what happened to
them, and on threat of legal action the lawyers demanded, and got,
the titles to the properties returned to their offices.

The caveats effectively barred the new owners and Money for
Living from ever selling the properties, and that suffocated Money
for Living: it could

not flip newly acquired properties onto third parties and
receive its $30,000 per property fee, so its cash flow dried
up.

By September 23, all Money for Living's staff were gone and Ms
Olszewski had quit the board. On Monday, director Gary O'Neill
asked George Georges and Peter McCluskey of Ferrier Hodgson to take
charge. The administrators found no cash in the bank accounts and
no way of paying the retirees their monthly instalments.

Now legal challenges loom. The administrators want the lawyers
to return the property titles, the lawyers allege false and
misleading conduct by Money for Living, financiers that loaned the
new owners money to buy the houses claim they were never told there
were guaranteed lifetime tenancies.

Once the corporate regulators and administrators unravel the
tangle of titles and claims, there may well be people facing
serious questions about propriety.

The Age was not able to contact Stephen or Gary O'Neill
or Ms Olszewski for comment.

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1127804661538-theage.com.auhttp://www.theage.com.au/news/national/deal-was-no-scam-just-too-good-to-be-true/2005/09/30/1127804661538.htmltheage.com.auThe Age2005-10-01Deal was no scam, just too good to be trueRetirees were persuaded the plan was a winner. It wasn't, write
Leonie Wood and Bridie Smith.Nationalhttp://www.theage.com.au/media/2005/09/30/1127804662523.htmlThe money trailimage/graphics-popout